10-Q

UNITED STATES

securities and exchange commission

Washington D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number: 000-28827

______________________

PETMED EXPRESS, INC.

(Exact name of registrant as specified in its charter)

______________________

Florida	65-0680967
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

420 South Congress Avenue, Delray Beach, Florida 33445

(Address of principal executive offices, including zip code)

(561) 526-4444

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	PETS	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ☐	Accelerated filer    ☒
Non-accelerated filer    ☐	Smaller reporting company    ☐
Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 20,271,122 Common Shares, $.001 par value per share at January 26, 2021.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for per share amounts)

	December 31,		March 31,
	2020		2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	106,501	$	103,762
Accounts receivable, less allowance for doubtful accounts of $28 and $59, respectively		1,831		3,843
Inventories - finished goods		28,165		17,884
Prepaid expenses and other current assets		4,512		3,529
Total current assets		141,009		129,018
Noncurrent assets:
Property and equipment, net		25,502		25,445
Intangible assets		860		860
Total noncurrent assets		26,362		26,305
Total assets	$	167,371	$	155,323
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	21,869	$	19,658
Accrued expenses and other current liabilities		4,429		4,214
Income taxes payable		623		471
Total current liabilities		26,921		24,343
Deferred tax liabilities		1,323		970
Total liabilities		28,244		25,313
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value, 5,000 shares authorized; 3 convertible shares issued and outstanding with a liquidation preference of $4 per share		9		9
Common stock, $.001 par value, 40,000 shares authorized; 20,271 and 20,166 shares issued and outstanding, respectively		20		20
Additional paid-in capital		6,098		3,804
Retained earnings		133,000		126,177
Total shareholders' equity		139,127		130,010
Total liabilities and shareholders' equity	$	167,371	$	155,323

See accompanying notes to condensed consolidated financial statements.

1

PETMED EXPRESS, INC. AND SUBSIDIARIES

condensed consolidated statementS of INCOME

(In thousands, except for per share amounts)(Unaudited)

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Sales	$	65,896	$	59,915	$	237,536	$	209,839
Cost of sales		46,273		42,218		168,110		150,279
Gross profit		19,623		17,697		69,426		59,560
Operating expenses:
General and administrative		6,487		6,040		21,050		18,851
Advertising		3,221		3,163		17,385		16,543
Depreciation		622		562		1,791		1,702
Total operating expenses		10,330		9,765		40,226		37,096
Income from operations		9,293		7,932		29,200		22,464
Other income:
Interest income, net		73		421		229		1,447
Other, net		345		301		938		862
Total other income		418		722		1,167		2,309
Income before provision for income taxes		9,711		8,654		30,367		24,773
Provision for income taxes		2,100		1,814		6,576		5,925
Net income	$	7,611	$	6,840	$	23,791	$	18,848
Net income per common share:
Basic	$	0.38	$	0.34	$	1.19	$	0.94
Diluted	$	0.38	$	0.34	$	1.18	$	0.94
Weighted average number of common shares outstanding:
Basic		20,094		19,984		20,047		20,060
Diluted		20,104		19,994		20,100		20,071
Cash dividends declared per common share	$	0.28	$	0.27	$	0.84	$	0.81

See accompanying notes to condensed consolidated financial statements.

2

PETMED EXPRESS, INC. AND SUBSIDIARIES

condensed consolidated statementS of cash flows

(In thousands)(Unaudited)

	Nine Months Ended
	December 31,
	2020			2019
Cash flows from operating activities:
Net income	$	23,791		$	18,848
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,791			1,702
Share based compensation		2,294			2,081
Deferred income taxes		353			(12	)
Bad debt expense		84			102
(Increase) decrease in operating assets and increase (decrease) in liabilities:
Accounts receivable		1,928			388
Inventories - finished goods		(10,281	)		(2,795	)
Prepaid income taxes		-			582
Prepaid expenses and other current assets		(983	)		(1,424	)
Accounts payable		2,211			360
Accrued expenses and other current liabilities		286			851
Income taxes payable		152			895
Net cash provided by operating activities		21,626			21,578
Cash flows from investing activities:
Purchases of property and equipment		(1,848	)		(1,827	)
Net cash used in investing activities		(1,848	)		(1,827	)
Cash flows from financing activities:
Repurchase and retirement of common stock		-			(11,496	)
Dividends paid		(17,039	)		(16,410	)
Net cash used in financing activities		(17,039	)		(27,906	)
Net increase (decrease) in cash and cash equivalents		2,739			(8,155	)
Cash and cash equivalents, at beginning of period		103,762			100,529
Cash and cash equivalents, at end of period	$	106,501		$	92,374
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	6,356		$	4,460
Property and equipment in current assets	$	-		$	1,344
Dividends payable in accrued expenses	$	174		$	196

See accompanying notes to condensed consolidated financial statements.

3

PETMED EXPRESS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Summary of Significant Accounting Policies

Organization

PetMed Express, Inc. and subsidiaries, d/b/a 1-800-PetMeds (the “Company”), is a leading nationwide pet pharmacy. The Company markets prescription and non-prescription pet medications, health products, and supplies for dogs, cats, and horses direct to the consumer. The Company offers consumers an attractive alternative for obtaining pet medications in terms of convenience, price, speed of delivery, and valued customer service. The Company markets its products through national advertising campaigns, which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.petmeds.com, acquire new customers, and maximize repeat purchases. Virtually all of the Company’s sales are to residents in the United States. The Company’s corporate headquarters and distribution facility is located in Delray Beach, Florida. The Company’s fiscal year end is March 31, and references herein to Fiscal 2021 or Fiscal 2020 refer to the Company's fiscal years ending March 31, 2021 and 2020, respectively.

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company at December 31, 2020, the Statements of Income for the three and nine months ended December 31, 2020 and 2019, and Cash Flows for the nine months ended December 31, 2020 and 2019. The results of operations for the three and nine months ended December 31, 2020 are not necessarily indicative of the operating results expected for the fiscal year ending March 31, 2021. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2020. The Condensed Consolidated Financial Statements include the accounts of PetMed Express, Inc. and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplification and reduce the cost of accounting for income taxes (“ASU 2019-12”). The Company is currently evaluating the impact of ASU 2019-12. The Company will adopt ASU 2019-12 on April 1, 2021.

The Company does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

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Note 2: Revenue Recognition

The Company generates revenue by selling pet medication products and pet supplies. Certain pet supplies offered on the Company’s website are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product; customer care and support is deemed not to be a material right in the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns, however, this is not considered a key judgment. There are no amounts excluded from variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs. This key judgment is determined as the shipping point represents the point in time in which the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership. Outbound shipping and handling fees are an accounting policy election, and are included in sales as the Company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales.

The Company disaggregates revenue in the following two categories: (1) Reorder revenue vs. new order revenue, and (2) Internet revenue vs. contact center revenue. The following table illustrates revenue by various classifications:

Three Months Ended December 31,
Revenue (In thousands)	2020		%			2019		%			$ Variance			% Variance
Reorder Sales	$	60,233		91.4	%	$	53,808		89.8	%	$	6,425			11.9	%
New Order Sales		5,663		8.6	%		6,107		10.2	%		(444	)		-7.3	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%
Internet Sales	$	54,984		83.4	%	$	50,000		83.5	%	$	4,984			10.0	%
Contact Center Sales		10,912		16.6	%		9,915		16.5	%		997			10.1	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%

Nine Months Ended December 31,
Sales (In thousands)	2020		%			2019		%			$ Variance		% Variance
Reorder Sales	$	208,419		87.7	%	$	183,401		87.4	%	$	25,018		13.6	%
New Order Sales		29,117		12.3	%		26,438		12.6	%		2,679		10.1	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%
Internet Sales	$	199,192		83.9	%	$	175,476		83.6	%	$	23,716		13.5	%
Contact Center Sales		38,344		16.1	%		34,363		16.4	%		3,981		11.6	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%

Virtually all of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize the accounts receivable balances relative to sales. The Company had no material contract asset or contract liability balances as of December 31, 2020 or March 31, 2020.

Note 3: Net Income Per Share

In accordance with the provisions of Accounting Standards Codification (ASC) Topic 260 (“Earnings Per Share”) basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share includes the dilutive effect of potential restricted stock and the effects of the potential conversion of preferred shares, calculated using the treasury stock method. Unvested restricted stock and convertible preferred shares issued by the Company represent the only dilutive effect reflected in the diluted weighted average shares outstanding.

5

 

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented (in thousands, except for per share amounts):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Net income (numerator):
Net income	$	7,611	$	6,840	$	23,791	$	18,848
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation		20,094		19,984		20,047		20,060
Common shares issuable upon vesting of restricted stock		-		-		43		1
Common shares issuable upon conversion of preferred shares		10		10		10		10
Shares used in diluted computation		20,104		19,994		20,100		20,071
Net income per common share:
Basic	$	0.38	$	0.34	$	1.19	$	0.94
Diluted	$	0.38	$	0.34	$	1.18	$	0.94

For the three and nine months ended December 31, 2020, 130,326 shares of common restricted stock were excluded from the computations of diluted net income per common share, as their inclusion would have had an anti-dilutive effect on diluted net income per common share. For the three and nine months ended December 31, 2019, 72,120 shares of common restricted stock were excluded from the computations of diluted net income per common share, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.

Note 4: Accounting for Stock-Based Compensation

The Company records compensation expense associated with restricted stock in accordance with ASC Topic 718 (“Share Based Payment”) (ASU 2016-09). The compensation expense related to all of the Company’s stock-based compensation arrangements is recorded as a component of general and administrative expenses. The Company had 972,175 restricted common shares issued under the 2006 Employee Equity Compensation Restricted Stock Plan (“2006 Employee Plan”), 220,848 restricted common shares issued under the 2016 Employee Equity Compensation Restricted Stock Plan (“2016 Employee Plan” and collectively referred to with the 2006 Employee Plan as the “Employee Plans”), 272,000 restricted common shares issued under the 2006 Outside Director Equity Compensation Restricted Stock Plan (“2006 Director Plan”), and 172,500 restricted common shares issued under the 2015 Outside Director Equity Compensation Restricted Stock Plan (“2015 Director Plan”, and collectively referred to with the 2006 Director Plan as the “Director Plans”) at December 31, 2020, all shares of which were issued subject to a restriction or forfeiture period that lapses ratably on the first, second, and third anniversaries of the date of grant, and the fair value of which is being amortized over the one to three-year restriction period.

For the quarters ended December 31, 2020 and 2019, the Company recognized $781,000 and $716,000, respectively, of compensation expense related to the Employee and Director Plans. For the nine months ended December 31, 2020 and 2019, the Company recognized $2.3 million and $2.1 million, respectively, of compensation expense related to the Employee and Director Plans. At December 31, 2020 and 2019, there was $3.6 million and $3.4 million of unrecognized compensation cost related to the non-vested restricted stock awards, respectively, which is expected to be recognized over the next three years. At December 31, 2020 and 2019, there were approximately 177,000 and 183,000 non-vested restricted shares, respectively.

Note 5: Fair Value

The Company carries various assets and liabilities at fair value in the Condensed Consolidated Balance Sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. ASC Topic 820 (“Fair Value Measurements”) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

6

 

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. At December 31, 2020, the Company had invested virtually all of its $106.5 million cash and cash equivalents balance in money market funds which are classified within level 1.

Note 6: Commitments and Contingencies

The Company has settled complaints that had been filed with various states’ regulatory boards in the past. There can be no assurances made that other states will not attempt to take similar actions against the Company in the future. The Company initiates litigation to protect its trade or service marks. There can be no assurance that the Company will be successful in protecting its trade or service marks. Legal costs related to the above matters are expensed as incurred.

Note 7: Changes in Shareholders’ Equity

Changes in shareholders’ equity for the nine months ended December 31, 2020 and 2019 are summarized below (in thousands):

	Additional
	Paid-In		Retained
	Capital		Earnings
Beginning balance at March 31, 2020:	$	3,804	$	126,177
Share based compensation		740		-
Dividends declared		-		(5,647	)
Net income		-		7,768
Ending balance at June 30, 2020:	$	4,544	$	128,298
Share based compensation		773		-
Dividends declared		-		(5,647	)
Net income		-		8,412
Ending balance at September 30, 2020:	$	5,317	$	131,063
Share based compensation		781		-
Dividends declared		-		(5,674	)
Net income		-		7,611
Ending balance at December 31, 2020:	$	6,098	$	133,000

	Additional
	Paid-In			Retained
	Capital			Earnings
Beginning balance at March 31, 2019:	$	12,478		$	122,172
Share based compensation		635			-
Dividends declared		-			(5,518	)
Repurchase and retirement of common stock		(11,496	)		-
Net income		-			5,343
Ending balance at June 30, 2019:	$	1,617		$	121,997
Share based compensation		730			-
Dividends declared		-			(5,447	)
Net income		-			6,665
Ending balance at September 30, 2019:	$	2,347		$	123,215
Share based compensation		716			-
Dividends declared		-			(5,437	)
Net income		-			6,840
Ending balance at December 31, 2019:	$	3,063		$	124,618

7

 

During the nine months ended December 31, 2019, the Company purchased and retired approximately 613,000 shares of its common stock for approximately $11.5 million. There were no shares of common stock that were purchased or retired in the nine months ended December 31, 2020. At December 31, 2020, the Company had approximately $28.7 million remaining under the Company’s share repurchase plan.

Note 8: Income Taxes

For the quarters ended December 31, 2020 and 2019, the Company recorded an income tax provision of approximately $2.1 million and $1.8 million, respectively, and for the nine months ended December 31, 2020 and 2019, the Company recorded an income tax provision of approximately $6.6 million and $5.9 million, respectively. The increase in the income tax provision for the three and nine months ended December 31, 2020 is related to an increase in operating income for both periods compared to the same periods in the prior year. The effective tax rate for the quarter ended December 31, 2020 was approximately 21.6% compared to 21.0% for the quarter ended December 31, 2019, and the effective tax rate for the nine months ended December 31, 2020 was approximately 21.7%, compared to 23.9% for the nine months ended December 31, 2019. The increase to the effective rate for the quarter ended December 31, 2020 was due to a one-time income tax benefit of $194,000 related to the reconciliation of the Company’s tax return for the fiscal year ending March 31, 2020, with the Company receiving a larger one-time income tax benefit in the prior year due to a reduction in the Florida state corporate income tax rate along with receiving a one-time income tax benefit of $93,000 related to the reconciliation of the Company’s tax return for the fiscal year ending March 31, 2019. The decrease to the effective rate for the nine months ended December 31, 2020 can be attributed to the Company receiving a one-time state income tax refund of $285,000 in the June 2020 quarter and a $106,000 income tax benefit related to restricted stock compensation in the September 2020 quarter, compared to a $322,000 income tax charge related to restricted stock compensation, which was recognized in the September 2019 quarter.

Note 9: Subsequent Events

On January 19, 2021 our Board of Directors declared a quarterly dividend of $0.28 per share. The Board established a February 1, 2021 record date and a February 12, 2021 payment date. Based on the outstanding share balance as of January 26, 2021 the Company estimates the dividend payable to be approximately $5.7 million.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Executive Summary

PetMed Express was incorporated in the state of Florida in January 1996. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “PETS.” The Company began selling pet medications and other pet health products in September 1996. In March 2010, the Company started offering for sale additional pet supplies on its website, and these items are drop shipped to customers by third party vendors. Presently, the Company’s product line includes approximately 3,000 of the most popular pet medications, health products, and supplies for dogs, cats, and horses.

The Company markets its products through national advertising campaigns which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 84% of all sales were generated via the Internet for both the quarters ended December 31, 2020 and 2019. The Company’s sales consist of products sold mainly to retail consumers. The three-month average purchase was approximately $88 and $85 per order for the quarters ended December 31, 2020 and 2019, respectively, and for the nine months ended December 31, 2020 and 2019, the average purchase was approximately $88 and $86 per order, respectively.

Critical Accounting Policies

Our discussion and analysis of our financial condition and the results of our operations contained herein are based upon our Condensed Consolidated Financial Statements and the data used to prepare them. The Company’s Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. On an ongoing basis we re-evaluate our judgments and estimates including those related to product returns, bad debts, inventories, and income taxes. We base our estimates and judgments on our historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. Our estimates are guided by observing the following critical accounting policies.

Revenue recognition

The Company generates revenue by selling pet medication products and pet supplies mainly to retail customers. Certain pet supplies offered on the Company’s website are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product; customer care and support is deemed not to be a material right to the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns; however, this is not considered a key judgment. There are no amounts excluded from variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs. This key judgment is determined as the shipping point represents the point in time in which the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership.

Outbound shipping and handling fees are an accounting policy election, and are included in sales as the Company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales. Virtually all of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales.

The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card charge-backs or insufficient funds checks. The Company determines its estimates of the un-collectability of accounts receivable by analyzing historical bad debts and current economic trends. The allowance for doubtful accounts was approximately $28,000 at December 31, 2020 compared to $59,000 at March 31, 2020.

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Valuation of inventory

Inventories consist of prescription and non-prescription pet medications and pet supplies that are available for sale and are priced at the lower of cost or net realizable value using a weighted average cost method. The Company writes down its inventory for estimated obsolescence. The inventory reserve was approximately $71,000 at December 31, 2020 compared to $45,000 at March 31, 2020.

Advertising

The Company's advertising expense consists primarily of Internet marketing, direct mail/print, and television advertising. Internet costs are expensed in the month incurred and direct mail/print advertising costs are expensed when the related catalogs, brochures, and postcards are produced, distributed, or superseded. Television advertising costs are expensed as the advertisements are televised.

Accounting for income taxes

The Company accounts for income taxes under the provisions of ASC Topic 740 (“Accounting for Income Taxes”), which generally requires recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in the Company’s Condensed Consolidated Financial Statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting carrying values and the tax bases of assets and liabilities, and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse.

Results of Operations

The following should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain operating data appearing in the Company’s Condensed Consolidated Statements of Income:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2020			2019			2020			2019
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		70.2			70.5			70.8			71.6
Gross profit		29.8			29.5			29.2			28.4
Operating expenses:
General and administrative		9.8			10.1			8.9			9.0
Advertising		4.9			5.3			7.3			7.9
Depreciation		0.9			0.9			0.7			0.8
Total operating expenses		15.6			16.3			16.9			17.7
Income from operations		14.2			13.2			12.3			10.7
Total other income		0.6			1.2			0.5			1.1
Income before provision for income taxes		14.8			14.4			12.8			11.8
Provision for income taxes		3.2			3.0			2.8			2.8
Net income		11.6	%		11.4	%		10.0	%		9.0	%

10

Three Months Ended December 31, 2020 Compared With Three Months Ended December 31, 2019, and Nine Months Ended December 31, 2020 Compared With Nine Months Ended December 31, 2019

COVID-19

We are dedicated to making every effort to ensure our customers’ pets receive the medications they need. We are also dedicated to making every effort to ensure the health and safety of our employees. We have continued with working from home where possible and enhanced disinfection and social distancing within our work place. The Company has been open during our normal business hours without any material disruptions to our operations. We have not seen any major disruptions in our supply chain, however we have experienced some delays in the delivery of some inventory items. See risk factor “The recent outbreak of the COVID-19 global pandemic and related government, private sector and individual consumer responsive actions may adversely affect our business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of time” in Part I, Item 1A of our Form 10-K.

Sales

Sales increased by approximately $6.0 million, or 10.0%, to approximately $65.9 million for the quarter ended December 31, 2020, from approximately $59.9 million for the quarter ended December 31, 2019. For the nine months ended December 31, 2020, sales increased by approximately $27.7 million, or 13.2%, to approximately $237.5 million compared to $209.8 million for the nine months ended December 31, 2019. The increase in sales for the quarter ended December 31, 2020 was primarily due to increased reorder sales offset by decreased new order sales, and the increase in sales for the nine months ended December 31, 2020 was primarily due to increased new order and reorder sales. Our reorder sales growth for the three and nine months ended December 31, 2020 likely improved due to the increased use of loyalty credits by our customers through our Loyalty Program, which was launched in September 2019, and due to our Easy Refill Program. The Company acquired approximately 73,000 new customers for the quarter ended December 31, 2020, compared to approximately 76,000 new customers for the same period the prior year. For the nine months ended December 31, 2020 the Company acquired approximately 356,000 new customers, compared to 313,000 new customers for the nine months ended December 31, 2019. The following chart illustrates sales by various sales classifications:

Three Months Ended December 31,
Sales (In thousands)	2020		%			2019		%			$ Variance			% Variance
Reorder Sales	$	60,233		91.4	%	$	53,808		89.8	%	$	6,425			11.9	%
New Order Sales		5,663		8.6	%		6,107		10.2	%		(444	)		-7.3	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%
Internet Sales	$	54,984		83.4	%	$	50,000		83.5	%	$	4,984			10.0	%
Contact Center Sales		10,912		16.6	%		9,915		16.5	%		997			10.1	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%

Nine Months Ended December 31,
Sales (In thousands)	2020		%			2019		%			$ Variance		% Variance
Reorder Sales	$	208,419		87.7	%	$	183,401		87.4	%	$	25,018		13.6	%
New Order Sales		29,117		12.3	%		26,438		12.6	%		2,679		10.1	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%
Internet Sales	$	199,192		83.9	%	$	175,476		83.6	%	$	23,716		13.5	%
Contact Center Sales		38,344		16.1	%		34,363		16.4	%		3,981		11.6	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%

11

Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. No guarantees can be made that sales will grow in the future. The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications. For the quarters ended June 30, September 30, December 31, and March 31 of Fiscal 2020, the Company’s sales were approximately 28%, 25%, 21%, and 26%, respectively, of the total fiscal year sales.

Cost of sales

Cost of sales increased by approximately $4.1 million, or 9.6%, to approximately $46.3 million for the quarter ended December 31, 2020, from approximately $42.2 million for the quarter ended December 31, 2019. For the nine months ended December 31, 2020, cost of sales increased by approximately $17.8 million, or 11.9%, to approximately $168.1 million compared to $150.3 million for the same period in the prior year. The cost of sales increases can be directly related to the increase in sales during the quarter and nine months ended December 31, 2020. Cost of sales as a percent of sales was 70.2% and 70.5% for the quarters ended December 31, 2020 and 2019, respectively, and for the nine months ended December 31, 2020 and 2019 the cost of sales was 70.8% and 71.6%, respectively. The cost of sales percentage decreases can be attributed to the benefit of having direct relationships with all major manufacturers, which helped reduce product costs, and these manufacturers having minimum advertised price policies.

Gross profit

Gross profit increased by approximately $1.9 million, or 10.9%, to approximately $19.6 million for the quarter ended December 31, 2020, from approximately $17.7 million for the quarter ended December 31, 2019. For the nine months ended December 31, 2020 gross profit increased by approximately $9.9 million, or 16.6%, to approximately $69.4 million, compared to $59.6 million for the same period in the prior year. The increases in gross profit are directly related to an increase to sales during the quarter and nine months ended December 31, 2020. Gross profit as a percentage of sales was 29.8% and 29.5% for the three months ended December 31, 2020 and 2019, respectively, and for the nine months ended December 31, 2020 and 2019, gross profit as a percentage of sales was 29.2% and 28.4%, respectively. The gross profit percentage increases can be mainly attributed to the benefit of having direct relationships with all major manufacturers, which helped reduce product costs, and these manufacturers having minimum advertised price policies.

General and administrative expenses

General and administrative expenses increased by approximately $447,000, or 7.4%, to approximately $6.5 million for the quarter ended December 31, 2020, compared to $6.0 million for the quarter ended December 31, 2019. The increase in general and administrative expenses for the quarter ended December 31, 2020 was primarily due to the following: a $260,000 increase in payroll expense, a $158,000 increase in bank service fees, and a $70,000 net increase of other expenses which includes telephone and insurance expenses, offset by a $41,000 decrease in professional fees. For the nine months ended December 31, 2020, general and administrative expenses increased by approximately $2.2 million, or 11.7%, to approximately $21.1 million, compared to $18.9 million for the same period the prior year. The increase in general and administrative expenses for the nine months ended December 31, 2020 was primarily due to the following: a $1.4 million increase in payroll expense, a $584,000 increase in bank service fees, a $221,000 increase in computer related property expenses, a $167,000 increase in telephone expenses, and a $28,000 net increase of other expenses which includes insurance and other expenses, offset by a $174,000 decrease in professional fees.

Advertising expenses

Advertising expenses were approximately $3.2 million for both the quarters ended December 31, 2020 and 2019. For the nine months ended December 31, 2020, advertising expenses increased by approximately $842,000, or 5.1%, to approximately $17.4 million compared to advertising expenses of approximately $16.5 million for the nine months ended December 31, 2019. The Company received increased cooperative marketing funds from product manufacturers to offset our advertising expenses, within the terms of our contractual relationships, during the three and nine months ended December 31, 2020. The increase in advertising expenses for the nine months ended December 31, 2020 was consistent with the Company’s 2021 marketing plan. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, increased to $44 for the quarter ended December 31, 2020 compared to $42 for the quarter ended December 31, 2019. For the nine months ended December 31, 2020 and 2019 the advertising costs of acquiring a new customer were $49 and $53, respectively. Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, advertising spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future sales, whereas a less favorable advertising environment may negatively impact future sales.

12

As a percentage of sales, advertising expense was 4.9% and 5.3% for the quarters ended December 31, 2020 and 2019, respectively, and for the nine months ended December 31, 2020 and 2019 advertising expense was 7.3% and 7.9%, respectively. The decreases in advertising expense as a percentage of total sales for the quarter and nine months ended December 31, 2020 can be attributed to an increase in sales as compared to the same periods in the prior year. The Company currently anticipates advertising as a percentage of sales to be approximately between 7.5% and 8.0% for fiscal 2021. However, the advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability.

Depreciation

Depreciation expense for the quarter ended December 31, 2020 increased slightly by approximately $60,000 to $622,000 compared to $562,000 for the quarter ended December 31, 2019. For the nine months ended December 31, 2020 and 2019 depreciation expense were approximately $1.8 million and $1.7 million, respectively. The increases to depreciation expense for the quarter and nine months ended December 31, 2020 can be attributed to increased new property and equipment additions during the current year.

Other income

Other income decreased by approximately $304,000, to approximately $418,000 for the quarter ended December 31, 2020 from approximately $722,000 for the quarter ended December 31, 2019. For the nine months ended December 31, 2020 other income decreased by approximately $1.1 million, to approximately $1.2 million compared to approximately $2.3 million for the same period in the prior year. The decrease to other income for the quarter and nine months ended December 31, 2020 was primarily related to decreased interest income due to decreased interest rates compared to the prior year. Interest income may decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately $28.7 million remaining as of December 31, 2020, on any quarterly dividend payment, on its operating activities, or with further decreases in interest rates.

Provision for income taxes

For the quarters ended December 31, 2020 and 2019, the Company recorded an income tax provision of approximately $2.1 million and $1.8 million, respectively, and for the nine months ended December 31, 2020 and 2019, the Company recorded an income tax provision of approximately $6.6 million and $5.9 million, respectively. The increase in the income tax provision for the three and nine months ended December 31, 2020 is related to an increase in operating income for both periods compared to the same periods in the prior year. The effective tax rate for the quarter ended December 31, 2020 was approximately 21.6% compared to 21.0% for the quarter ended December 31, 2019, and the effective tax rate for the nine months ended December 31, 2020 was approximately 21.7%, compared to 23.9% for the nine months ended December 31, 2019. The increase to the effective rate for the quarter ended December 31, 2020 was due to a one-time income tax benefit of $194,000 related to the reconciliation of the Company’s tax return for the fiscal year ending March 31, 2020, with the Company receiving a larger one-time income tax benefit in the prior year due to a reduction in the Florida state corporate income tax rate along with receiving a one-time income tax benefit of $93,000 related to the reconciliation of the Company’s tax return for the fiscal year ending March 31, 2019. The decrease to the effective rate for the nine months ended December 31, 2020 can be attributed to the Company receiving a one-time state income tax refund of $285,000 in the June 2020 quarter and a $106,000 income tax benefit related to restricted stock compensation in the September 2020 quarter, compared to a $322,000 income tax charge related to restricted stock compensation, which was recognized in the September 2019 quarter.

Liquidity and Capital Resources

The Company’s working capital at December 31, 2020 and March 31, 2020 was $114.1 million and $104.7 million, respectively. The $9.4 million increase in working capital was primarily attributable to income generated by operations, offset by dividends paid in the period. Net cash provided by operating activities was $21.6 million for both the nine months ended December 31, 2020 and 2019. Net cash used in investing activities was $1.8 million for both the nine months ended December 31, 2020 and 2019. Net cash used in financing activities was $17.0 million for the nine months ended December 31, 2020, compared to $27.9 million for the same period in the prior year. The change to financing activities relates to the Company purchasing approximately 613,000 shares of its common stock for approximately $11.5 million during the nine months ended December 31, 2019, compared to no share repurchases during the nine months ended December 31, 2020. The remaining change to financing activities related to an increase in the dividend paid in the nine months ended December 31, 2020, compared to the prior period.

13

At December 31, 2020, the Company had approximately $28.7 million remaining under the Company’s share repurchase plan. Subsequent to December 31, 2020, on January 19, 2021 our Board of Directors declared a quarterly dividend of $0.28 per share. The Board established a February 1, 2021 record date and a February 12, 2021 payment date. Depending on future market conditions the Company may utilize its cash and cash equivalents on the remaining balance of its current share repurchase plan, on dividends, or on its operating activities.

At December 31, 2020, the Company had no material outstanding lease commitments. We are not currently bound by any long or short term agreements for the purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Presently, we have approximately $500,000 forecasted for capital expenditures for the remainder of fiscal 2021, the majority of which will be invested in our e-commerce platform to better service our customers, which will be funded through cash from operations. The Company’s primary source of working capital is cash from operations. The Company presently has no need for alternative sources of working capital, and has no commitments or plans to obtain additional capital.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements at December 31, 2020.

Cautionary Statement Regarding Forward-Looking Information

Certain information in this Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the words "believes," "intends," "expects," "may," "will," "should," "plans," "projects," "contemplates," "intends," "budgets," "predicts," "estimates," "anticipates," or similar expressions. These statements are based on our beliefs, as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. A reader, whether investing in our common stock or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. When used in this quarterly report on Form 10-Q, "PetMed Express," "1-800-PetMeds," "PetMeds," "PetMed," "PetMeds.com," “1800PetMeds.com,” "PetMed.com," "PetMed Express.com," "the Company," "we," "our," and "us" refers to PetMed Express, Inc. and our subsidiaries.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk generally represents the risk that losses may occur in the value of financial instruments as a result of movements in interest rates, foreign currency exchange rates, and commodity prices. Our financial instruments include cash and cash equivalents, accounts receivable, and accounts payable. The book values of cash equivalents, accounts receivable, and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. Interest rates affect our return on excess cash and cash investments. At December 31, 2020, we had $106.5 million in cash and cash equivalents, and a majority of our cash and cash equivalents generate interest income based on prevailing interest rates. A significant change in interest rates would impact the amount of interest income generated from our excess cash and cash equivalents. It would also impact the market value of our cash and cash equivalents. Our cash equivalents are subject to market risk, primarily interest rate and credit risk. Our cash equivalents are managed by a limited number of outside professional managers within investment guidelines set by our Board of Directors. Such guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting our cash and cash equivalents to high-quality debt instruments with both short and long term maturities. We do not hold any derivative financial instruments that could expose us to significant market risk. At December 31, 2020, we had no debt obligations.

14

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company’s management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended) as of the quarter ended December 31, 2020, the end of the period covered by this report (the "Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective such that the information relating to our Company, including our consolidated subsidiaries, required to be disclosed by the Company in reports that it files or submits under the Exchange Act: (1) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and (2) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

part ii  -  other information

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, and trading price of our common stock. Please refer to our Annual Report on Form 10-K for Fiscal Year 2020 for additional information concerning these and other uncertainties that could negatively impact the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The Company did not make any sales of unregistered securities during the third quarter of Fiscal 2021.

Issuer Purchases of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

15

ITEM 6. EXHIBITS

The following exhibits are filed as part of this report.

31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities Exchange Act of 1934, as amended (filed herewith to Exhibit 31.1 of the Registrant’s Report on Form 10-Q for the quarter ended December 31, 2020, Commission File No. 000-28827).

31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities Exchange Act of 1934, as amended (filed herewith to Exhibit 31.2 of the Registrant’s Report on Form 10-Q for the quarter ended December 31, 2020, Commission File No. 000-28827).

32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith to Exhibit 32.1 of the Registrant’s Report on Form 10-Q for the quarter ended December 31, 2020, Commission File No. 000-28827).

101.INS* Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*     XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

16

signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PETMED EXPRESS, INC.
(The “Registrant”)
Date: January 26, 2021
By:	/s/  Menderes Akdag
	Menderes Akdag
	Chief Executive Officer and Presiden
	(principal executive officer)
By:	/s/   Bruce S. Rosenbloom
	Bruce S. Rosenbloom
	Chief Financial Officer
	(principal financial and accounting officer)

17

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

_______________________

PETMED EXPRESS, INC

_______________________

FORM 10-Q

FOR THE QUARTER ENDED:

DECEMBER 31, 2020

_______________________

EXHIBITS

_______________________

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Menderes Akdag, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended December 31, 2020 of PetMed Express, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

January 26, 2021
By:	/s/ Menderes Akdag

Menderes Akdag

Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce S. Rosenbloom, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended December 31, 2020 of PetMed Express, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

January 26, 2021
By:	/s/ Bruce S. Rosenbloom

Bruce S. Rosenbloom

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Menderes Akdag, and I, Bruce S. Rosenbloom, each certify to the best of our knowledge, based upon a review of the report on Form 10-Q for the quarter ended December 31, 2020 (the “Report”) of the Registrant, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report, fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: January 26, 2021
By:	/s/ Menderes Akdag

Menderes Akdag

Chief Executive Officer and President

By:   /s/ Bruce S. Rosenbloom

Bruce S. Rosenbloom

Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Dec. 31, 2020	Jan. 26, 2021
Document Information [Line Items]
Entity Central Index Key	0001040130
Entity Registrant Name	PETMED EXPRESS INC
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2020
Document Transition Report	false
Entity File Number	000-28827
Entity Incorporation, State or Country Code	FL
Entity Tax Identification Number	65-0680967
Entity Address, Address Line One	420 South Congress Avenue
Entity Address, City or Town	Delray Beach
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33445
City Area Code	561
Local Phone Number	526-4444
Title of 12(b) Security	Common Stock, par value $.001 per share
Trading Symbol	PETS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		20,271,122

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Current assets:
Cash and cash equivalents	$ 106,501	$ 103,762
Accounts receivable, less allowance for doubtful accounts of $28 and $59, respectively	1,831	3,843
Inventories - finished goods	28,165	17,884
Prepaid expenses and other current assets	4,512	3,529
Total current assets	141,009	129,018
Noncurrent assets:
Property and equipment, net	25,502	25,445
Intangible assets	860	860
Total noncurrent assets	26,362	26,305
Total assets	167,371	155,323
Current liabilities:
Accounts payable	21,869	19,658
Accrued expenses and other current liabilities	4,429	4,214
Income taxes payable	623	471
Total current liabilities	26,921	24,343
Deferred tax liabilities	1,323	970
Total liabilities	28,244	25,313
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value, 5,000 shares authorized; 3 convertible shares issued and outstanding with a liquidation preference of $4 per share	9	9
Common stock, $.001 par value, 40,000 shares authorized; 20,271 and 20,166 shares issued and outstanding, respectively	20	20
Additional paid-in capital	6,098	3,804
Retained earnings	133,000	126,177
Total shareholders' equity	139,127	130,010
Total liabilities and shareholders' equity	$ 167,371	$ 155,323

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) shares in Thousands, $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Allowance for doubtful accounts	$ 28	$ 59
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000	5,000
Preferred stock, liquidation preference (in dollars per share)	$ 4	$ 4
Preferred stock, shares issued (in shares)	3	3
Preferred stock, shares outstanding (in shares)	3	3
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	40,000	40,000
Common stock, shares issued (in shares)	20,271	20,166
Common stock, shares outstanding (in shares)	20,271	20,166

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Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Sales	$ 65,896	$ 59,915	$ 237,536	$ 209,839
Cost of sales	46,273	42,218	168,110	150,279
Gross profit	19,623	17,697	69,426	59,560
Operating expenses:
General and administrative	6,487	6,040	21,050	18,851
Advertising	3,221	3,163	17,385	16,543
Depreciation	622	562	1,791	1,702
Total operating expenses	10,330	9,765	40,226	37,096
Income from operations	9,293	7,932	29,200	22,464
Other income:
Interest income, net	73	421	229	1,447
Other, net	345	301	938	862
Total other income	418	722	1,167	2,309
Income before provision for income taxes	9,711	8,654	30,367	24,773
Provision for income taxes	2,100	1,814	6,576	5,925
Net income	$ 7,611	$ 6,840	$ 23,791	$ 18,848
Net income per common share:
Basic (in dollars per share)	$ 0.38	$ 0.34	$ 1.19	$ 0.94
Diluted (in dollars per share)	$ 0.38	$ 0.34	$ 1.18	$ 0.94
Basic (in shares)	20,094	19,984	20,047	20,060
Diluted (in shares)	20,104	19,994	20,100	20,071
Cash dividends declared per common share (in dollars per share)	$ 0.28	$ 0.27	$ 0.84	$ 0.81

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities:
Net income	$ 23,791	$ 18,848
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,791	1,702
Share based compensation	2,294	2,081
Deferred income taxes	353	(12)
Bad debt expense	84	102
(Increase) decrease in operating assets and increase (decrease) in liabilities:
Accounts receivable	1,928	388
Inventories - finished goods	(10,281)	(2,795)
Prepaid income taxes	0	582
Prepaid expenses and other current assets	(983)	(1,424)
Accounts payable	2,211	360
Accrued expenses and other current liabilities	286	851
Income taxes payable	152	895
Net cash provided by operating activities	21,626	21,578
Cash flows from investing activities:
Purchases of property and equipment	(1,848)	(1,827)
Net cash used in investing activities	(1,848)	(1,827)
Cash flows from financing activities:
Repurchase and retirement of common stock	0	(11,496)
Dividends paid	(17,039)	(16,410)
Net cash used in financing activities	(17,039)	(27,906)
Net increase (decrease) in cash and cash equivalents	2,739	(8,155)
Cash and cash equivalents, at beginning of period	103,762	100,529
Cash and cash equivalents, at end of period	106,501	92,374
Supplemental disclosure of cash flow information:
Cash paid for income taxes	6,356	4,460
Property and equipment in current assets	0	1,344
Dividends payable in accrued expenses	$ 174	$ 196

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Note 1 - Summary of Significant Accounting Policies

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

Note 1: Summary of Significant Accounting Policies

Organization

PetMed Express, Inc. and subsidiaries, d/b/a 1-800-PetMeds (the “Company”), is a leading nationwide pet pharmacy. The Company markets prescription and non-prescription pet medications, health products, and supplies for dogs, cats, and horses direct to the consumer. The Company offers consumers an attractive alternative for obtaining pet medications in terms of convenience, price, speed of delivery, and valued customer service. The Company markets its products through national advertising campaigns, which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.petmeds.com, acquire new customers, and maximize repeat purchases. Virtually all of the Company’s sales are to residents in the United States. The Company’s corporate headquarters and distribution facility is located in Delray Beach, Florida. The Company’s fiscal year end is March 31, and references herein to Fiscal 2021 or Fiscal 2020 refer to the Company's fiscal years ending March 31, 2021 and 2020, respectively.

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company at December 31, 2020, the Statements of Income for the three and nine months ended December 31, 2020 and 2019, and Cash Flows for the nine months ended December 31, 2020 and 2019. The results of operations for the three and nine months ended December 31, 2020 are not necessarily indicative of the operating results expected for the fiscal year ending March 31, 2021. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2020. The Condensed Consolidated Financial Statements include the accounts of PetMed Express, Inc. and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplification and reduce the cost of accounting for income taxes (“ASU 2019-12”). The Company is currently evaluating the impact of ASU 2019-12. The Company will adopt ASU 2019-12 on April 1, 2021.

The Company does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

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Note 2 - Revenue Recognition

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note 2: Revenue Recognition

The Company generates revenue by selling pet medication products and pet supplies. Certain pet supplies offered on the Company’s website are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product; customer care and support is deemed not to be a material right in the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns, however, this is not considered a key judgment. There are no amounts excluded from variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs. This key judgment is determined as the shipping point represents the point in time in which the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership. Outbound shipping and handling fees are an accounting policy election, and are included in sales as the Company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales.

The Company disaggregates revenue in the following two categories: (1) Reorder revenue vs. new order revenue, and (2) Internet revenue vs. contact center revenue. The following table illustrates revenue by various classifications:

Three Months Ended December 31,
Revenue (In thousands)	2020		%			2019		%			$ Variance			% Variance
Reorder Sales	$	60,233		91.4	%	$	53,808		89.8	%	$	6,425			11.9	%
New Order Sales		5,663		8.6	%		6,107		10.2	%		(444	)		-7.3	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%
Internet Sales	$	54,984		83.4	%	$	50,000		83.5	%	$	4,984			10.0	%
Contact Center Sales		10,912		16.6	%		9,915		16.5	%		997			10.1	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%

Nine Months Ended December 31,
Sales (In thousands)	2020		%			2019		%			$ Variance		% Variance
Reorder Sales	$	208,419		87.7	%	$	183,401		87.4	%	$	25,018		13.6	%
New Order Sales		29,117		12.3	%		26,438		12.6	%		2,679		10.1	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%
Internet Sales	$	199,192		83.9	%	$	175,476		83.6	%	$	23,716		13.5	%
Contact Center Sales		38,344		16.1	%		34,363		16.4	%		3,981		11.6	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%

Virtually all of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize the accounts receivable balances relative to sales. The Company had no material contract asset or contract liability balances as of December 31, 2020 or March 31, 2020.

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Note 3 - Net Income Per Share

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

Note 3: Net Income Per Share

In accordance with the provisions of Accounting Standards Codification (ASC) Topic 260 (“Earnings Per Share”) basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share includes the dilutive effect of potential restricted stock and the effects of the potential conversion of preferred shares, calculated using the treasury stock method. Unvested restricted stock and convertible preferred shares issued by the Company represent the only dilutive effect reflected in the diluted weighted average shares outstanding.

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented (in thousands, except for per share amounts):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Net income (numerator):
Net income	$	7,611	$	6,840	$	23,791	$	18,848
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation		20,094		19,984		20,047		20,060
Common shares issuable upon vesting of restricted stock		-		-		43		1
Common shares issuable upon conversion of preferred shares		10		10		10		10
Shares used in diluted computation		20,104		19,994		20,100		20,071
Net income per common share:
Basic	$	0.38	$	0.34	$	1.19	$	0.94
Diluted	$	0.38	$	0.34	$	1.18	$	0.94

For the three and nine months ended December 31, 2020, 130,326 shares of common restricted stock were excluded from the computations of diluted net income per common share, as their inclusion would have had an anti-dilutive effect on diluted net income per common share. For the three and nine months ended December 31, 2019, 72,120 shares of common restricted stock were excluded from the computations of diluted net income per common share, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.

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Note 4 - Accounting for Stock-based Compensation

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note 4: Accounting for Stock-Based Compensation

The Company records compensation expense associated with restricted stock in accordance with ASC Topic 718 (“Share Based Payment”) (ASU 2016-09). The compensation expense related to all of the Company’s stock-based compensation arrangements is recorded as a component of general and administrative expenses. The Company had 972,175 restricted common shares issued under the 2006 Employee Equity Compensation Restricted Stock Plan (“2006 Employee Plan”), 220,848 restricted common shares issued under the 2016 Employee Equity Compensation Restricted Stock Plan (“2016 Employee Plan” and collectively referred to with the 2006 Employee Plan as the “Employee Plans”), 272,000 restricted common shares issued under the 2006 Outside Director Equity Compensation Restricted Stock Plan (“2006 Director Plan”), and 172,500 restricted common shares issued under the 2015 Outside Director Equity Compensation Restricted Stock Plan (“2015 Director Plan”, and collectively referred to with the 2006 Director Plan as the “Director Plans”) at December 31, 2020, all shares of which were issued subject to a restriction or forfeiture period that lapses ratably on the first, second, and third anniversaries of the date of grant, and the fair value of which is being amortized over the one to three-year restriction period.

For the quarters ended December 31, 2020 and 2019, the Company recognized $781,000 and $716,000, respectively, of compensation expense related to the Employee and Director Plans. For the nine months ended December 31, 2020 and 2019, the Company recognized $2.3 million and $2.1 million, respectively, of compensation expense related to the Employee and Director Plans. At December 31, 2020 and 2019, there was $3.6 million and $3.4 million of unrecognized compensation cost related to the non-vested restricted stock awards, respectively, which is expected to be recognized over the next three years. At December 31, 2020 and 2019, there were approximately 177,000 and 183,000 non-vested restricted shares, respectively.

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Note 5 - Fair Value

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note 5: Fair Value

The Company carries various assets and liabilities at fair value in the Condensed Consolidated Balance Sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. ASC Topic 820 (“Fair Value Measurements”) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. At December 31, 2020, the Company had invested virtually all of its $106.5 million cash and cash equivalents balance in money market funds which are classified within level 1.

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Note 6 - Commitments and Contingencies

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 6: Commitments and Contingencies

The Company has settled complaints that had been filed with various states’ regulatory boards in the past. There can be no assurances made that other states will not attempt to take similar actions against the Company in the future. The Company initiates litigation to protect its trade or service marks. There can be no assurance that the Company will be successful in protecting its trade or service marks. Legal costs related to the above matters are expensed as incurred.

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Note 7 - Changes in Shareholders' Equity

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note 7: Changes in Shareholders’ Equity

Changes in shareholders’ equity for the nine months ended December 31, 2020 and 2019 are summarized below (in thousands):

	Additional
	Paid-In		Retained
	Capital		Earnings
Beginning balance at March 31, 2020:	$	3,804	$	126,177
Share based compensation		740		-
Dividends declared		-		(5,647	)
Net income		-		7,768
Ending balance at June 30, 2020:	$	4,544	$	128,298
Share based compensation		773		-
Dividends declared		-		(5,647	)
Net income		-		8,412
Ending balance at September 30, 2020:	$	5,317	$	131,063
Share based compensation		781		-
Dividends declared		-		(5,674	)
Net income		-		7,611
Ending balance at December 31, 2020:	$	6,098	$	133,000

	Additional
	Paid-In			Retained
	Capital			Earnings
Beginning balance at March 31, 2019:	$	12,478		$	122,172
Share based compensation		635			-
Dividends declared		-			(5,518	)
Repurchase and retirement of common stock		(11,496	)		-
Net income		-			5,343
Ending balance at June 30, 2019:	$	1,617		$	121,997
Share based compensation		730			-
Dividends declared		-			(5,447	)
Net income		-			6,665
Ending balance at September 30, 2019:	$	2,347		$	123,215
Share based compensation		716			-
Dividends declared		-			(5,437	)
Net income		-			6,840
Ending balance at December 31, 2019:	$	3,063		$	124,618

During the nine months ended December 31, 2019, the Company purchased and retired approximately 613,000 shares of its common stock for approximately $11.5 million. There were no shares of common stock that were purchased or retired in the nine months ended December 31, 2020. At December 31, 2020, the Company had approximately $28.7 million remaining under the Company’s share repurchase plan.

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Note 8 - Income Taxes

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 8: Income Taxes

For the quarters ended December 31, 2020 and 2019, the Company recorded an income tax provision of approximately $2.1 million and $1.8 million, respectively, and for the nine months ended December 31, 2020 and 2019, the Company recorded an income tax provision of approximately $6.6 million and $5.9 million, respectively. The increase in the income tax provision for the three and nine months ended December 31, 2020 is related to an increase in operating income for both periods compared to the same periods in the prior year. The effective tax rate for the quarter ended December 31, 2020 was approximately 21.6% compared to 21.0% for the quarter ended December 31, 2019, and the effective tax rate for the nine months ended December 31, 2020 was approximately 21.7%, compared to 23.9% for the nine months ended December 31, 2019. The increase to the effective rate for the quarter ended December 31, 2020 was due to a one-time income tax benefit of $194,000 related to the reconciliation of the Company’s tax return for the fiscal year ending March 31, 2020, with the Company receiving a larger one-time income tax benefit in the prior year due to a reduction in the Florida state corporate income tax rate along with receiving a one-time income tax benefit of $93,000 related to the reconciliation of the Company’s tax return for the fiscal year ending March 31, 2019. The decrease to the effective rate for the nine months ended December 31, 2020 can be attributed to the Company receiving a one-time state income tax refund of $285,000 in the June 2020 quarter and a $106,000 income tax benefit related to restricted stock compensation in the September 2020 quarter, compared to a $322,000 income tax charge related to restricted stock compensation, which was recognized in the September 2019 quarter.

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Note 9 - Subsequent Events

9 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

Note 9: Subsequent Events

On January 19, 2021 our Board of Directors declared a quarterly dividend of $0.28 per share. The Board established a February 1, 2021 record date and a February 12, 2021 payment date. Based on the outstanding share balance as of January 26, 2021 the Company estimates the dividend payable to be approximately $5.7 million.

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Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Basis Of Presentation and Consolidation [Policy Text Block]

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company at December 31, 2020, the Statements of Income for the three and nine months ended December 31, 2020 and 2019, and Cash Flows for the nine months ended December 31, 2020 and 2019. The results of operations for the three and nine months ended December 31, 2020 are not necessarily indicative of the operating results expected for the fiscal year ending March 31, 2021. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2020. The Condensed Consolidated Financial Statements include the accounts of PetMed Express, Inc. and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplification and reduce the cost of accounting for income taxes (“ASU 2019-12”). The Company is currently evaluating the impact of ASU 2019-12. The Company will adopt ASU 2019-12 on April 1, 2021.

The Company does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

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Note 2 - Revenue Recognition (Tables)

9 Months Ended

Dec. 31, 2020

Notes Tables

Disaggregation of Revenue [Table Text Block]

Three Months Ended December 31,
Revenue (In thousands)	2020		%			2019		%			$ Variance			% Variance
Reorder Sales	$	60,233		91.4	%	$	53,808		89.8	%	$	6,425			11.9	%
New Order Sales		5,663		8.6	%		6,107		10.2	%		(444	)		-7.3	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%
Internet Sales	$	54,984		83.4	%	$	50,000		83.5	%	$	4,984			10.0	%
Contact Center Sales		10,912		16.6	%		9,915		16.5	%		997			10.1	%
Total Net Sales	$	65,896		100.0	%	$	59,915		100.0	%	$	5,981			10.0	%

Nine Months Ended December 31,
Sales (In thousands)	2020		%			2019		%			$ Variance		% Variance
Reorder Sales	$	208,419		87.7	%	$	183,401		87.4	%	$	25,018		13.6	%
New Order Sales		29,117		12.3	%		26,438		12.6	%		2,679		10.1	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%
Internet Sales	$	199,192		83.9	%	$	175,476		83.6	%	$	23,716		13.5	%
Contact Center Sales		38,344		16.1	%		34,363		16.4	%		3,981		11.6	%
Total Net Sales	$	237,536		100.0	%	$	209,839		100.0	%	$	27,697		13.2	%

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Note 3 - Net Income Per Share (Tables)

9 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Net income (numerator):
Net income	$	7,611	$	6,840	$	23,791	$	18,848
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation		20,094		19,984		20,047		20,060
Common shares issuable upon vesting of restricted stock		-		-		43		1
Common shares issuable upon conversion of preferred shares		10		10		10		10
Shares used in diluted computation		20,104		19,994		20,100		20,071
Net income per common share:
Basic	$	0.38	$	0.34	$	1.19	$	0.94
Diluted	$	0.38	$	0.34	$	1.18	$	0.94

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Note 7 - Changes in Shareholders' Equity (Tables)

9 Months Ended

Dec. 31, 2020

Notes Tables

Schedule of Stockholders Equity [Table Text Block]

	Additional
	Paid-In		Retained
	Capital		Earnings
Beginning balance at March 31, 2020:	$	3,804	$	126,177
Share based compensation		740		-
Dividends declared		-		(5,647	)
Net income		-		7,768
Ending balance at June 30, 2020:	$	4,544	$	128,298
Share based compensation		773		-
Dividends declared		-		(5,647	)
Net income		-		8,412
Ending balance at September 30, 2020:	$	5,317	$	131,063
Share based compensation		781		-
Dividends declared		-		(5,674	)
Net income		-		7,611
Ending balance at December 31, 2020:	$	6,098	$	133,000

	Additional
	Paid-In			Retained
	Capital			Earnings
Beginning balance at March 31, 2019:	$	12,478		$	122,172
Share based compensation		635			-
Dividends declared		-			(5,518	)
Repurchase and retirement of common stock		(11,496	)		-
Net income		-			5,343
Ending balance at June 30, 2019:	$	1,617		$	121,997
Share based compensation		730			-
Dividends declared		-			(5,447	)
Net income		-			6,665
Ending balance at September 30, 2019:	$	2,347		$	123,215
Share based compensation		716			-
Dividends declared		-			(5,437	)
Net income		-			6,840
Ending balance at December 31, 2019:	$	3,063		$	124,618

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Note 2 - Revenue Recognition (Details Textual)	9 Months Ended
	Dec. 31, 2020
Minimum [Member]
Credit Card Sales, Cash Settlement Period (Day)	2 days
Maximum [Member]
Credit Card Sales, Cash Settlement Period (Day)	3 days

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Note 2 - Revenue Recognition - Disaggregation of Revenue by Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Revenues	$ 65,896	$ 59,915	$ 237,536	$ 209,839
Revenues, percentage	100.00%	100.00%	100.00%	100.00%
Revenues, variance	$ 5,981		$ 27,697
Revenues, variance, percentage	10.00%		13.20%
Internet [Member]
Revenues	$ 54,984	$ 50,000	$ 199,192	$ 175,476
Revenues, percentage	83.40%	83.50%	83.90%	83.60%
Revenues, variance	$ 4,984		$ 23,716
Revenues, variance, percentage	10.00%		13.50%
Contact Center [Member]
Revenues	$ 10,912	$ 9,915	$ 38,344	$ 34,363
Revenues, percentage	16.60%	16.50%	16.10%	16.40%
Revenues, variance	$ 997		$ 3,981
Revenues, variance, percentage	10.10%		11.60%
Reorder Customer [Member]
Revenues	$ 60,233	$ 53,808	$ 208,419	$ 183,401
Revenues, percentage	91.40%	89.80%	87.70%	87.40%
Revenues, variance	$ 6,425		$ 25,018
Revenues, variance, percentage	11.90%		13.60%
New Order Customer [Member]
Revenues	$ 5,663	$ 6,107	$ 29,117	$ 26,438
Revenues, percentage	8.60%	10.20%	12.30%	12.60%
Revenues, variance	$ (444)		$ 2,679
Revenues, variance, percentage	(7.30%)		10.10%

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Note 3 - Net Income Per Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	130,326	72,120	130,326	72,120

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Note 3 - Net Income Per Share - Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Net income (numerator):
Net income	$ 7,611	$ 6,840	$ 23,791	$ 18,848
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation (in shares)	20,094	19,984	20,047	20,060
Common shares issuable upon vesting of restricted stock (in shares)	0	0	43	1
Common shares issuable upon conversion of preferred shares (in shares)	10	10	10	10
Shares used in diluted computation (in shares)	20,104	19,994	20,100	20,071
Net income per common share
Basic (in dollars per share)	$ 0.38	$ 0.34	$ 1.19	$ 0.94
Diluted (in dollars per share)	$ 0.38	$ 0.34	$ 1.18	$ 0.94

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Note 4 - Accounting for Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
2006 Employee Equity Compensation Restricted Stock Plan (the "Employee Plan") [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in shares)			972,175
2016 Employee Equity Compensation Restricted Stock Plan [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in shares)			220,848
2006 Outside Director Equity Compensation Restricted Stock Plan (the "Director Plan") [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in shares)			272,000
2015 Outside Director Equity Compensation Restricted Stock Plan ("2015 Director Plan") [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in shares)			172,500
2015 Outside Director Equity Compensation Restricted Stock Plan ("2015 Director Plan") [Member] | Restricted Stock [Member] | Minimum [Member]
Restriction Period (Year)			1 year
2015 Outside Director Equity Compensation Restricted Stock Plan ("2015 Director Plan") [Member] | Restricted Stock [Member] | Maximum [Member]
Restriction Period (Year)			3 years
Employee and Director Plans [Member]
Share-based Payment Arrangement, Expense	$ 781,000	$ 716,000	$ 2,300,000	$ 2,100,000
Employee and Director Plans [Member] | Restricted Stock [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 3,600,000	$ 3,400,000	$ 3,600,000	$ 3,400,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)			3 years	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance (in shares)	177,000	183,000	177,000	183,000

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Note 5 - Fair Value (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2020	Mar. 31, 2020
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 106,501	$ 103,762

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Note 7 - Changes in Shareholders' Equity (Details Textual) - USD ($) $ in Millions	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Stock Repurchased and Retired During Period, Shares (in shares)	0	613,000
Stock Repurchased and Retired During Period, Value		$ 11.5
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 28.7

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Note 7 - Changes in Shareholders' Equity - Schedule of Changes in Shareholders' Equity (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2020	Dec. 31, 2019
Balance			$ 130,010				$ 130,010
Net income	$ 7,611			$ 6,840			23,791	$ 18,848
Repurchase and retirement of common stock								(11,500)
Balance	139,127						139,127
Additional Paid-in Capital [Member]
Balance	5,317	$ 4,544	3,804	2,347	$ 1,617	$ 12,478	3,804	12,478
Share based compensation	781	773	740	716	730	635
Dividends declared	0	0	0	0	0	0
Net income	0	0	0	0	0	0
Repurchase and retirement of common stock						(11,496)
Balance	6,098	5,317	4,544	3,063	2,347	1,617	6,098	3,063
Retained Earnings [Member]
Balance	131,063	128,298	126,177	123,215	121,997	122,172	126,177	122,172
Share based compensation	0	0	0	0	0	0
Dividends declared	(5,674)	(5,647)	(5,647)	(5,437)	(5,447)	(5,518)
Net income	7,611	8,412	7,768	6,840	6,665	5,343
Repurchase and retirement of common stock						0
Balance	$ 133,000	$ 131,063	$ 128,298	$ 124,618	$ 123,215	$ 121,997	$ 133,000	$ 124,618

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Note 8 - Income Taxes (Details Textual) - USD ($)	3 Months Ended				9 Months Ended		12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2020	Dec. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Income Tax Expense (Benefit), Total	$ 2,100,000		$ 1,814,000		$ 6,576,000	$ 5,925,000
Effective Income Tax Rate Reconciliation, Percent, Total	21.60%		21.00%		21.70%	23.90%
Proceeds from Income Tax Refunds					$ 285,000		$ 194,000	$ 93,000
Effective Income Tax Rate Reconciliation, Tax Expense (Benefit), Share-based Payment Arrangement, Amount		$ 106,000		$ 322,000

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Note 9 - Subsequent Events (Details Textual) - Subsequent Event [Member] - USD ($) $ / shares in Units, $ in Millions	Jan. 19, 2021	Jan. 26, 2021
Dividends Payable, Date Declared	Jan. 19, 2021
Dividends Payable, Amount Per Share (in dollars per share)	$ 0.28
Dividends Payable, Date of Record	Feb. 01, 2021
Dividends Payable, Date to be Paid	Feb. 12, 2021
Dividends Payable		$ 5.7